Negligent misstatement, nuisance and no statutory defence – a fatal combination for Council

29 January 2021

The plaintiff homeowner sued Council for negligent misstatement and nuisance for failing to disclose the existence of an underground stormwater pipe on a planning certificate issued prior to purchase. The pipe ultimately became blocked, resulting in stormwater inundation to the property.

In Issue

  • Negligent misstatement – breach of duty by Council issuing a planning certificate pursuant to s149 Environmental Planning & Assessment Act
  • Private nuisance by public authority

The background

In August 2010, the first defendant (Council) issued a planning certificate for a residential property situated at 13 Appian Way, Burwood, New South Wales (the property). The certificate did not disclose the existence of a pipe that ran underneath the property (the pipe was laid in the early 1900s) or a 2002 Council resolution to acquire an easement over the pipe and to establish a drainage easement over the property’s western boundary.

In March 2011, the plaintiff purchased the property from the second defendant for $3 Million. Between November 2011 – October 2012, the property was flooded on 9 occasions by overland flows of stormwater from Appian Way (the flooding occurred when the underground pipe became blocked, causing stormwater to back up on Appian Way). The plaintiff brought an action against Council, amongst others, for negligent misstatement in respect of the planning certificate and nuisance in respect of the escape of stormwater across her land.

The decision at trial

Pursuant to section 149 of the Environmental Planning and Assessment Act 1979 (the Act), Council was required to issue a planning certificate that answered the question of whether the land was affected by “a policy adopted by the Council … that restricted the development of the land because of the likelihood of… flooding”. Council answered “no” to this question and its defence was based on the interpretation of the words “policy”, “restricts the development of the land” and “flooding”. The Court rejected Council’s position and found that the 2002 resolution was a “policy” and therefore, it was incorrect for Council to have answered the above question “no”.

Council purported to rely on s43A of the Civil Liability Act, however the Court held that section did not apply because the planning certificate was not issued in the exercise of statutory power. Rather, by providing the certificate Council performed a statutorily imposed obligation.

The Court accepted the plaintiff’s evidence that if she had known at any time prior to completing the purchase that there was a stormwater pipe running under the house, she would have rescinded the contract. The court was therefore satisfied that but for Council’s erroneous and negligent answer in the planning certificate, the plaintiff would not have suffered the loss of paying $3M for the property when its true value was considerably lower, having regard to the impairment constituted by the pipe. The plaintiff was awarded $1.219M, being the difference between the purchase price of the property and the market value at that time, discounted by reason of its impaired state.

With respect to the nuisance claim, Council argued a cause of action can only be sustained against a public authority if the escape of stormwater onto private property occurred through negligence. Council disputed that it was negligent and argued that during the 11 month period of intermittent flooding, the plaintiff refused Council access to her property to rectify the blockage in the pipe. The Court held that drainage works constructed by Council along Appian Way in 2005 caused stormwater to discharge into the property in a manner that unreasonably interfered with the enjoyment of the property. The plaintiff was awarded $55,000 for this portion of the claim.

After making his Orders Judge Fagan added a postscript in which he was very critical of the conduct of Council not only in relation to its lack of response to historical complaints about the stormwater system in Appian Way but more specifically, in its conduct of the defence of the claim. His Honour specifically referred to correspondence written by the Mayor alleging that the plaintiff delayed the resolution of her complaint by refusing access to her property and commented that the ratepayers of Burwood had been burdened with substantial legal and other costs by Council’s decision to pursue litigation rather than the construction of drainage works.

Implications for you

This decision demonstrates the risks for Councils associated with issuing planning certificates and highlights the need for clear and unambiguous information on matters affecting the use of land. The decision also demonstrates the difficulties in successfully defending a claim based on s 43A CLA – a very particular interpretation of statutory power resulted in liability for the Council.

Lorenzato v Burwood Council [2020] NSWSC 1659

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